Greetings, and welcome to the Kulicke & Soffa Third Fiscal Quarter 2013 Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Elgindy, Director of Investor Relations and Strategic Planning for Kulicke & Soffa. Thank you, Mr. Elgindy, you may now begin.

Thank you, Rob. Good morning, everyone, and welcome to Kulicke & Soffa's fiscal 2013 third quarter conference call. Joining us on the call today are Bruno Guilmart, President and CEO; and Jonathan Chou, Senior Vice President and CFO. Both are available for Q&A after the prepared comments. For those of you who have not received a copy of today's results, the release is available in the Investor Relations section of our website at kns.com. In addition to historical statements, today's remarks will contain statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a complete discussion of the risks associated with Kulicke & Soffa that could affect our future results and financial condition, please refer to our SEC filings, particularly the 10-K for the year ended September 29, 2012 and our other recent SEC filings. I would now like to turn the call over to Mr. Bruno Guilmart. Please go ahead, Bruno.

Thank you, Joe, and thank you all for joining our call today. Revenue in our third fiscal quarter 2013 was $141 million compared to $106 million in the second quarter of 2013. This exceeded the high end of our June quarter revenue guidance of $120 million to $130 million. In terms of color on our business dynamics in Q3, ball bonder volumes continued to increase. Compared to the prior quarter, this reflects a higher proportion of sales to our top five customers along with a broader recovery of the sector. In addition, we continued to see improved demand from China's expanding local OSATs customers as well. This diversification of our business is important as it helps to reduce our customer concentration. During our June quarter, 92% of bonders sold were sold to OSAT which is an increase from the prior quarter. During the June quarter, we have seen a pickup in wire bonded ordering patterns stemming from mobile applications and as well associated improvements in the memory segments. We expect demand from both these segments to continue through the September period. Our copper capable bonder engine represented 85.7% of total bonded sales in the third fiscal quarter, up from 67.7%. The underlying economics for the copper transition remain intact and K&S continues to be the industry's chosen supplier and leader of copper capable solutions. We remain optimistic about the company's revenue opportunities we see around the copper transition. As mentioned last quarter, wire bonding remains a very significant proper step for the overwhelming majority of global semiconductor products. Flip chip and advanced packaging techniques will likely compete for share of the most demanding performance-centric applications. For high performance applications that also demand multi efficiency, advanced packaging will likely provide an advantage over traditional flip chip. While these are innovative solutions…

Thank you, Bruno. My remarks today will only refer to GAAP results and will compare the June quarter to the March quarter. Net revenue for the quarter was $141.2 million, up $35.1 million from the March quarter. As Bruno mentioned earlier, we are pleased to have exceeded the high end of our revenue guidance. Net income for the June quarter was $18.9 million. This compares to $7.3 million in the prior quarter. From an EPS perspective, we achieved $0.25 per share in the third quarter compared to $0.10 per share in the March quarter of fiscal year 2013. Gross margin remained robust at 46.7% with gross profit at $65.9 million. This compares to a gross margin of 46% and gross profit of $48.8 million in the prior quarter. Operating expenses were $47 million compared to $40.6 million in the prior quarter. This $6.4 million increase was largely due to the March quarter's Research Incentive Scheme for Companies, RISC grant adjustment. This was a favorable benefit in the March quarter in the amount of $3 million due to the higher revenue outlook which Bruno will discuss in a moment. Our operating expenses in the current September quarter are anticipated to increase to $52 million driven by higher variable expenses. For the June quarter, income from operations was $18.9 million and our tax provision came in at $247,000. As noted on prior calls, we continue to target our long-term effective tax rate at 10% as we further simplify our tax structure. We ended the quarter with a total cash and investment position of $508.5 million. This is equivalent to $6.65 of cash and $8.93 of booked value per diluted share. With our strengthened debt-free balance sheet and increasing cash position, we are well positioned to continue to invest in advanced packaging and explore other growth opportunities. Even with a 33% revenue increase on the March quarter, we managed our operations well with working capital of only 9%. Working capital defined as accounts receivable plus inventory less accounts payable, increased to $148.9. From a DSO perspective, our days sales outstanding decreased to 94 days compared to 99 days in the prior quarter. Our days sales of inventory decreased from 72 days to 57 days. Our days accounts payable increased from 41 days to 55 days. This concludes the financial review portion of our call. I will now turn the discussion back over to Bruno for the September quarter's business outlook.

Thanks, Jonathan. In terms of our guidance for fiscal fourth quarter, we expect the continued pickup in our business with revenue to be approximately $175 million to $185 million. We continue to work to efficiency ramp our capacity and scale to meet this current quarter's demand. Leveraging our technical position and strong balance sheet, we continue to hit key markets and remain fully committed to pursuing internal and external growth opportunities where the strategic fit and potential return are in line with our corporate objectives. This concludes our prepared remarks. Operator, we will now be happy to take any questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Our first question is coming from the line of David Wu of Indaba Global. Please proceed with your question.

My first question really is on, can you say approximately how big the top five customers accounted for the June quarter revenues? And I would also like to throw on and given the variable structure of your costs, operating costs rather, how should we model the incremental flow through from higher revenue? It looks like revenue is going to be extending probably for the next couple of quarters? - Indaba Global Research: My first question really is on, can you say approximately how big the top five customers accounted for the June quarter revenues? And I would also like to throw on and given the variable structure of your costs, operating costs rather, how should we model the incremental flow through from higher revenue? It looks like revenue is going to be extending probably for the next couple of quarters?

So we don't really disclose the size of our top five customers. I believe we did mention something about – let me – in terms of percentage. Jonathan, you want comment?

Yeah. David, previously we did actually – in terms of the contribution from the top five customers, about 69% really contributed ball bonder revenue. [Multiple Speakers]

But we don't disclose if you want the granularity…

We know two of them anyway. - Indaba Global Research: We know two of them anyway.

That's an assumption you can make. As for the flow through, as you know, we are primarily outsourced, okay, so we are mostly a system integrator and therefore you do not have – which is basically enabling us to sustain this up and down – and respond also to this up and down in demand very quickly. So, therefore, we don't benefit as you want from a lot of the operating leverage. But pretty much what you can say is our gross margins typically flow through. There may change a little bit as a function of the mix of customers and products. We had the model also, so that's more for the cost of goods sold portion. For expenses we have, I would say, a portion of our operating expenses that are pretty much fixed. I believe the number is roughly about $38 million. And then on top of that, we have the variable portion which is in the range of 6% which is basically based on performance for all the employees in the company.

I see, okay. And I was wondering one another thing. When you say the China OSATs and are they – what particular vertical markets have the [new] China OSATs been concentrated in? - Indaba Global Research: I see, okay. And I was wondering one another thing. When you say the China OSATs and are they – what particular vertical markets have the [new] China OSATs been concentrated in?

I do not believe that there are specifically concentrating on a vertical market. There are quite a number of OSAT customers in China. I would probably say to give you a bit more color that there are about five that I would personally go through with that from a structure and the way they operate point of view. I think what they are trying to do is after serving for quite some time local Chinese customers which typically do not have I would say very demanding requirements. They are now trying to move the food chain introduced for, I would say, the more advanced ones, some copper solutions and also attract in connection with customers. But this – as you know it takes time to qualify a new source and so on, so this could take some time. But this is fairly new for us. I mean we had one or two and we are seeing activities in this space in China increasing which is brilliant.

Thank you. - Indaba Global Research: Thank you.

Thank you. Our next question is from the line of Andrew Masuda with D.A. Davidson. Proceed with your question.

Hi. This is Andrew Masuda calling in for Tom Diffley. Bruno, I was wondering if you could give us an update on where you believe the gold-to-copper transition currently is? - D.A. Davidson: Hi. This is Andrew Masuda calling in for Tom Diffley. Bruno, I was wondering if you could give us an update on where you believe the gold-to-copper transition currently is?

It's always tough when I think we are – you mean from a demand perspective or from an installed base perspective?

From a demand perspective? - D.A. Davidson: From a demand perspective?

From a demand, I think probably from – roughly what you can see is about – you should take really at the maximum level because it depends or it varies widely from one customer to the others. I think one-third overall has been converted. From a demand perspective and there are a number of used – not used, number of data available from the normal research firms, I think we'll probably get in the – just for purely wire bonded products, okay, I'm not talking about flip chip growing and advanced packaging taking a piece of the wire bonded business. We'll hand out probably in the 70%, that means 70% of all devices produced and one on the [70] will be using copper.

Okay, so it's fair to say that we're still maybe less than 50% done, 50% converted? - D.A. Davidson: Okay, so it's fair to say that we're still maybe less than 50% done, 50% converted?

Yeah. The pace of this is slowing down because as we all know the top two big guys in Taiwan have been a lot more aggressive than the others. But as I mentioned in my remarks, which is good news for us is we are seeing now other larger customers who are making a stronger push in the area as well as customers like we also have in China we typically didn't do much business with. So, for us it is basically good news in a way that while it's a little bit more challenging when you have your top two customers who represented so much of our business in the past not ordering as much as they used to but that gives us also the opportunity to grow and prospect a lot more and trying to, if you want, broaden our customer base to hopefully try to mitigate this cycle a little bit better.

Okay. And then can you guys give a geographic breakdown of revenue? - D.A. Davidson: Okay. And then can you guys give a geographic breakdown of revenue?

We don't break it down. I'll just give you a rough cut, okay. About half is what I call greater China and the rest is I would say rest of Asia so that's Korea, Japan, Southeast Asia. And U.S. is extremely small. We see a little bit of the wedge bonder activity up there, but it is very small. We see also a little bit of activity at some specific customer side, but it is very small. Europe actually is a little bit larger and especially in the Germany area where they have kept a strong industrial and manufacturing base and where we again have stronger – and what I'm saying is for wedge bonders where we do – related to this small portion of our business. But if you – all-in-all close to 90% of our business is in Asia, okay, and that's great now for us. When you get to 90% there is not much more room to increase, but it's not moving in the other direction that's for sure.

Okay, thank you. - D.A. Davidson: Okay, thank you.

Thank you. Our next question is from the line of David Duley with Steelhead Securities. Please proceed with your question.

Yes. Good morning. Nice quarter. Could you talk a little bit about your advanced packaging product initiative and could you give us an update on the roadmap there and when do you think they're going to have a product ready for beta? - Steelhead Securities: Yes. Good morning. Nice quarter. Could you talk a little bit about your advanced packaging product initiative and could you give us an update on the roadmap there and when do you think they're going to have a product ready for beta?

No, David. I'm not going to answer any of your questions because they are a part of our confidential, obviously, plans. I gave you a date for alpha which is already not bad, which is at the end of the calendar year which I think this December and you have been in the semi space for quite some time and that beta which basically are almost production ready machines don't come far behind the alpha. We have – what I can tell you to give you a little bit of granularity is that we now have a very tactical team working on that, I would say on that project not far from – probably about 100 engineers where we had less than 10 less than a year ago. So this project is moving along actually as well investing also quite significantly as well. We have already a few modules, process modules that are working according to specifications. We're seeing huge interest from customers, some we have never talked before because they are, I would say, higher in the supply chain. So what we have, if you want, and what we are targeting I think has the potential to become a true K&S offering solutions in terms of leadership technology because if you look at today, especially on similar bonding which is the area we are – the area we are targeting at, the competition is all over the place and really what customers are demanding which is a high level of accuracy coupled with distant UPH that can – with also a yield that can ramp. Of course they don't expect 99.9% yield like ball bonders but a yield management system that will help them get closer to driving the yield up and therefore the cost down. It seems that everything is pointing in the right direction right now as we think basically in the end of July.

Is the big hurdle here getting the throughput of the machine up and what throughput are you targeting? - Steelhead Securities: Is the big hurdle here getting the throughput of the machine up and what throughput are you targeting?

I can't give you this number. Yes, it's a huge hurdle. You have two hurdles. You have the accuracy and the accuracy while putting in the order of a micron if you want to be able to do advanced packaging and there is virtually only small, what I would call mom and pop shops that are able to deliver machines for R&D purpose with obviously a speed which is nowhere close to what you could use in the manufacturing environments, okay. So that's one hurdle. The other hurdle is speed. There are a number of suppliers that can provide you plenty of speed, but at 10 micron accuracy which is not going to do the job. The key is to have a machine that is accurate and relatively fast. I'm not talking about 10,000 UPH but not 50 UPH. So coupling the two together is a challenge and all the experience we've had over the years in ball bonding, also in die bonding because there is, I would say a lot of learning although we are not that successful penetrating that market because I think these are the products that we have are probably not properly targeted and what's probably over-specked versus where we wanted to go to. We did learn tremendously through that process and we are able to use and reuse some of that technology from our previous die bonder technology as well. So that was not all [inaudible]. I mean we are actually making some good progress. We actually kept a fairly small team in Switzerland looking after the software to help us while obviously Fort Washington is our R&D center for all advanced solutions. We do have also some people, quite a large number of people in Singapore working on that project, so that's the trick…

Okay. And just switch gears, when you look at your wire bonder business, it was up nicely sequentially but on a year-over-year basis it wasn't as strong as it was last year. Now with the copper conversion, I guess, roughly halfway over, do you think the swings in your business look more like the ones you're seeing this year or do you think you're going to go back to seeing these swings up to greater than 250 million in a quarter like you saw last year? - Steelhead Securities: Okay. And just switch gears, when you look at your wire bonder business, it was up nicely sequentially but on a year-over-year basis it wasn't as strong as it was last year. Now with the copper conversion, I guess, roughly halfway over, do you think the swings in your business look more like the ones you're seeing this year or do you think you're going to go back to seeing these swings up to greater than 250 million in a quarter like you saw last year?

Again, we don't provide guidance past the current quarter. I'll try to explain that we are seeing some changes in the marketplace with a demand accelerating for new type of packages, especially when there are problems to solve about real estate functionality and power consumption but they have to be or they are going to have to be at the right cost because I keep repeating that every call and I will keep repeating probably until I retire is wire bonding is still the most cost effective solution to interconnect a device onto any frame, substrate whatever we want. There is no doubt that we had huge sales wins like all businesses in – not counting this year, in the previous three years as we captured market share. The reality of the situation was we dominated the market. So when you are on top of the game, it's getting more difficult. We have in terms of penetration we're already highly penetrated in the two largest or one of the two largest OSATs in Greater China. So, my view is that if you ask me are we going to see this $250 swing, probably not but I hope to see – actually this swing, we don't like them, nobody likes them. They are hell to manage from a cost perspective, from a manufacturing perspective. We think actually we are in 2013 below the normalized markets by a few points and what we are hoping to achieve is actually to broaden this customer base, attract more customers again driven by demand to copper and it will be nice to do your business with 20 customers instead of two or three or four.

Now I think VLSI was predicting that the market would be down in 2013 versus 2012 for the total bonders. Do they expect a rebound in the following years or is this kind of a size of the market that we're looking at going forward? - Steelhead Securities: Now I think VLSI was predicting that the market would be down in 2013 versus 2012 for the total bonders. Do they expect a rebound in the following years or is this kind of a size of the market that we're looking at going forward?

I have looked at this VLSI data. It's a single digit to low single digit and I think it's been [coveraged][ph] over from now until five years. It doesn't move that much. If you look at the VLSI data, you would have seen that it's way over $1 billion term with a couple of ups and downs in between until 2017. Now be careful the VLSI I believe the VLSI data do include all bonders, wedge and ball bonders.

Okay, thank you. - Steelhead Securities: Okay, thank you.

(Operator Instructions). The next question is from Krish Sankar with Bank of America. Please proceed with your question.

Hi. Thanks for taking the question. Bruno, I just wanted to follow up on the year-over-year comparison. Is there a way to parse in between how much of this June or September being down versus last year Q2 OSAT CapEx being down versus a change in the business in general that you mentioned? - Bank of America/Merrill Lynch: Hi. Thanks for taking the question. Bruno, I just wanted to follow up on the year-over-year comparison. Is there a way to parse in between how much of this June or September being down versus last year Q2 OSAT CapEx being down versus a change in the business in general that you mentioned?

You mean the correlation between our third quarter which is – our fourth quarter which is the third quarter came under has been depending on the year a little bit down or up from the previous quarter, okay. So it is hard to find a trend. Now this year the first half was not very good, so we were able to pick up some business in this quarter and that's why we feel fairly confident with what we have provided as the guidance. Now to try to correlate what's happening – I mean if you look today and read the different reports that are coming out, I just read one about our customers. Some are reducing CapEx. On the other hand you see some demand increasing in some areas. It is very hard actually to try to understand what's going on at the macro level and just correlate that into what is going to happen to our business. Well, we gave our guidance. We are at the end of July, we still have two months to go and there is no doubt that this is our guidance is never a done deal, okay. So we'll push as hard as we can to get there or somewhere in between as it is our last fiscal year. But at the end of that, I mean the underlying demand of the main market drivers for that business. So we are prepared to basically execute on that guidance and right now we also feel confident that the demand is there as well. It's not [inaudible] given the guidance. So that's where we stand. And remember that in this business, everything has to be installed by calendar Q3, installed and working and qualified by calendar Q3 which is our Q4. So this is always not changed, okay. And so any uptick in demand, any customers that doesn't foresee – hasn't foreseen that yet and there is a – I would say because it's changing – what you hear can change from one day to the other pretty aggressively. If you are not prepared it is going to be extremely tough to get equipment in place before the end of the September quarter to be able to have products on the shelf before the Christmas season. So that's my observation. But I think at the end of the day, it's really the market dynamics that's driving all this.

Okay. And then one final question. What percentage of revenue is memory? - Bank of America/Merrill Lynch: Okay. And then one final question. What percentage of revenue is memory?

Hold on, I don't have the number handy. Maybe Joe can follow-up with you and we can give you – I'm not sure we disclosed it actually. But we can maybe give a ballpark. It has never been a huge number for us, okay. Just if you remember historically, it has never been a very significant number for us. It just happened that before we saw a little bit of a pickup in the memory space.

Thank you. - Bank of America/Merrill Lynch: Thank you.

It's generally around 10%.

Yeah, it's generally around 10%. It has not been also an area of much focus for us as well [inaudible]. So up to now at least there were not the advanced logic ICs we are using copper we were pursuing.

Thank you. Our next question comes from the line of Andy [inaudible], a private investor. Please proceed with your question.

Thank you and good morning. Jonathan, I'm going to ask you to repeat something for me. The RISC benefit, I did hear I think it was 3 million in the March quarter. Could you repeat what it was – what the impact was in the June quarter?

Yeah, the RISC grant is actually – basically we had a really – so now we had a good line in the last quarter and that's why it drove R&D spend down. So the RISC grant is actually – it's related to the Economic Development Board that the host – basically [inaudible] in some of the R&D spend.

Sorry to interrupt you, Jonathan. It's just that I want to clarify for the audience here. It's called RISC. It's not risk, okay. It's just acronyms that's turning to and we call it RISC, okay. But now Jonathan can give you the detail. It's related actually to money that we have received. So it's not really a risk at all.

No, I understand. Jonathan, I was looking for that number – also the impact in fiscal 2012 full year?

The impact on fiscal year 2012 and basically this is really the kind of support that we get on a quarterly basis from EDB for labs and fairly consistent in each quarter. Basically the RISC grant – we have to get back to you on the previous year, but it depends on really what the development efforts that we have from an engineering perspective that we submit to the Economic Development Board. So it's roughly about 2 million last year.

About 2 million for the year?

Yeah.

Okay, that's good enough for now. Bruno, one other question I'd like to ask you about the wedge bonder business. It appears to me that this business has soften considerably and that it's really lost some of the traction that perhaps was evident a few years ago. Do you wish to comment any further about the general trends in that business and what your expectations are going forward?

Well, in the wedge bonder business, there were a couple of things. First is I've never been a huge fan. We've always talked about $120 million, $150 million turn in a good year, but it is what I call more a legacy technology. The need for new technologies are not as demanding as in ball bonders because of just the nature of the product. This is heavy duty power devices that you find in white goods and so on. We thought for a while that we could get additional demand created by alternative energies and that not really realized. We had a few customers who tried and it was I guess – they adopted as a solution. We had also some [inaudible], but as we all know right now everybody talks a lot about electric vehicles. Hybrid was the hype 10 years ago. It kind of flattened out at the same time most company manufacturers worked on other much cheaper solutions to reduce their overall fuel consumption. So this area yes is getting out – by the way what we call hybrid, we differentiate power semi to hybrid, it doesn't mean hybrid vehicle. It just means modules, power modules. And so where is this business going? I mean if you look at the data that's available, it's a single digit business. We have now standing here about three years ago. Probably the result of an over investment especially in China and I think it took about three years to digest this capacity. These bonders tend to have also a lifecycle that last longer than a ball bonder. I mean you can use any for 10 years. So we are seeing actually some improvement in demand. We've launched a new product line at China SEMICON which is actually the driving mode and interest actually. We have already got some motors and shipped some systems. But let's not be overoptimistic here. This is a nice smaller size business that actually we're also right now undergoing some, I would say, internal efforts on how to run it better which is a little bit more tricky than for the ball bonders because it is vertically integrated, it is highly customized, so you cannot re-outsource although the new machines that we've – the new product line we've introduced is a lot more outsourced than we've ever done in the past, which is going to give us some flexibility. But it is not – we still have our market share 65%. We still dominate from the technological perspective. It has a nice gross margin. We actually just finished as we speak consolidating all the manufacturing sites because we have bits and pieces in three sites. Everything will be then in Singapore and that's kind of in the wedge bonder business. So don't expect to see something just out of the blue that where the demand for wedge bonders is going to double or triple. This is just not going to happen.

Thank you for the additional color.

Our next question is from the line of [William Young of CIMB Group]. Please proceed with your question.

Hello. Good morning. Thank you for answering my question. I have one. I may have missed that, could I have again the product mix of wedge bonder and advanced packaging, including flip chip?

I'm sorry. What is your question?

The revenue mix in the June quarter?

We don't disclose really the revenue mix in each quarter. What I can tell you is the majority of our – in terms of percentage, the majority of our revenue is coming from our wire bonders, which is our core business. Wedge bonder is a much – as I explained just previously is a much smaller portion of business because it's a much smaller comp. You are looking at probably a factor of 10 in between the ball bonder turn and the wedge bonder turn and we also have probably about 65% of that market, that market that has been depressed over that three years as a result of overinvestment in China. Wedge bonders again grew high power application such as white goods, electric motor vehicles and so on, so it's a very, very different market. And advanced packaging really is not even out yet. So it's a new project that we're working on. We have been starting working on and the alpha product will be out at the end of the year.

Okay. Now another question, we see China OSATs ramping up their copper wire bonding, but do we also see they're ramping up their flip chip?

Okay, so we don't really serve the flip chip market with the equipment that we had, so we don't strike that accurately. I am sure they are looking at it like every OSAT is looking at it, but I would suspect that they are definitely behind. If you want to have complete solution, I mean from an economic perspective, you must have a flip chip position. But just to give you an order of magnitude, I mean 10, 12 years ago [inaudible] that there will be no more ICs assembled or through the wire bonding technology. As we speak now, to-date it is about 85% from all devices assembled by wire bonders. So, yes, flip chip is going to increase. It's going to be driven by application because it's an expensive technology and the benefit of advanced packaging or flip chip which is kind of a derivative but much more advance and for even more advanced [inaudible] coming out of the fab which will have multiple technology actually on what I call the macro system itself which could them compact just flip chip. I mean it could have wire bonding, flip chip with a couple of [inaudible] and similar compressing all in one encapsulated surface with several dies inside. This is going to be required by performance, with strength and power, I would say, reduction driven by the [morbidity] application which are becoming more and more hungry in power and people have more and more and more out of their mobile devices. So it's got a kind of [inaudible] a little bit itself. You want more features, more performance and at the same time you want a small device that consume that and this is a real challenge for the industry.

Thank you.

(Operator Instructions). Thank you. We've come to the end of our question-and-answer session today. I will turn the floor back over to Joseph Elgindy for closing comments.

Thank you all for the time today. Please feel free to follow up with us after today's call with any additional questions. Before we go, I'd just like to inform investors that K&S will be participating in the Credit Suisse 14th Asian Investor Conference taking place in Taipei on September 11. For those who can't make this event in person please reference the webcast replays which will be available on our Investors site. Again, thank you all for the time today. Rob, this concludes our call. Thanks.

Thank you for your participation. You may now disconnect your lines at this time.